Tax Code: Starting from Scratch?

The Ministry of the Economy intends to withdraw its tax code bill from Verkhovna Rada for substantial revision. Minister of the Economy and European Integration Valery Khoroshkovsky announced yesterday that the bill is unacceptable in its current format, because it is (a) more fiscal than the existing tax system and (b) prolongs numerous tax concessions (the ministry proposes to replace them by direct targeted aid), for which reasons the ministry is for its adoption and step by step implementation.

The ministry’s proposal of a package reduction in the tax burden was supported by the parliamentary Finance and Banking Committee, whose Chairman Serhiy Buriak says the task is to pass four bills constituting the principal chapters of the tax code: the income tax on enterprises (already passed), individual income, excise, and value added taxes (the latter bill, he states, will take a month and a half to two months to work out).

Some lawmakers are skeptical about spreading out the tax reform in this way. “In the first place we must have a clear idea about what we are doing all this for. We must take a more extensive approach, without reducing it to several bills and tax rates,” says Serhiy Osyka, adding that tax concessions are a true evil for the economy, but one that has taken shape over a number of years and overcoming it overnight is easier said than done. Communist Mykola Kravchenko feels sure that the Ukrainian economy is not prepared to change any rules of the game, so discussing easing the tax burden under the circumstances is just words. He also calls into question the legitimacy of recalling the tax code bill, considering that it has already passed in the second reading. First Vice Premier Mykola Azarov declared several days ago that the individual income tax could be lowered to two rates (13% and 20%) instead of the existing five, with the emphasis on 13% and 20% being levied on especially high incomes. The VAT is expected to be lowered to 15% in conformity with the EU standard.